The French energy group, third on the global market, has achieved its transformation. It previous configuration seemed to steer it towards a slow death: resting on its laurels, the French energy giant could have simply collected dust on the market, awaiting its slow demise past the point of irrelevance, as so many other large state-owned companies have before. With its new stance, Engie now addresses the future in prime shape.
A rough market
Energy is one of the few sectors where steady demand doesn’t necessarily mean an easy life for the operators addressing it. The energy market is particularly volatile, deeply intertwined with political ramifications and sensitive to technological shifts. Energy expert Rich Dana wrote, a few years back: “As we usher in 2015, we see a great deal of volatility in the energy sector, both domestically and internationally, both in the fossil fuel market and the renewable energy industry. An interconnected web of economics, politics and technology, it is hard to know what might be over the horizon. One thing is for sure, though– we are in a state of flux, and headed for more change.” Today, the situation is no stabler. Gas pipelines from Eastern Europe, for example, could have seemed good news for the Western part of the continent, as power-hungry countries like France and Germany could then rely on Russian natural gas. However, as political tensions mounted, it became abundantly clear that those who relied on those fossil fuels remained at the mercy of Russia, who can cut off supplies at the blow of a whistle in its quest for political leverage. Moreover, even if political and diplomatic considerations are overlooked, it is becoming increasingly clear that fossil fuels can no longer be invested in. Which will run out first, reserves or the market’s patience for transitioning towards cleaner energy? Either way, although many energy firms still run today on coal and fossil fuels, any further investment in this direction would steer the investor in the wrong direction. Engie, under Isabelle Kocher’s leadership, has made the opposite choice and veered out of its comfort zone.
Isabelle Kocher, the captain at the helm
It took a fresh eye to see where the future of Engie lay. Isabelle Kocher, 51, had declined to take on leadership at the head of nuclear giant Areva in order to become one of France’s first female general managers for a top company. Her strategy was remarkably simple, pragmatic and effective: Decarbonation, Digitization and Decentralized – the 3D strategy. As reported by energy analyst Craig Richard, “Engie’s CEO Isabelle Kocher said: “Engie’s customers seek to design and execute their zero carbon transitions with increasing urgency. “It is core to their strategic goals, but often not core to their operational capabilities.” The renewed spending targets update a group strategy started in 2016, which focussed on decarbonisation, digitalisation and decentralisation.In the three years to 2018, Engie made €14.3 billion of growth investments, of which 48% was in its renewables and thermal segment, it stated in its full-year financial results.” Kocher wanted Engie decarbonated, in order to position it as a leader on the emerging – yet now confirmed – markets of renewable energy. Decentralization was enacted as a response to an ever-greater need for speed and agility. If Engie had continued to act as a monolithic block, requiring the signature of Paris for every business move, it would have been outrun by its competitors on virtually every deal. Finally, digitization may have been the hardest part. Engie is owned 25% by the French State, and the civil servant culture within it still runs deep. As any French citizen knows, French national companies are not known for their modern and high-tech ways to operate. Indeed, they systematically tend to be slowly dragging, decades behind modern nimble start-ups. By achieving digitization, Kocher made sure Engie could compete relevantly on its market, for the century to come.
Is the job done?
Now that the transformation is achieved, what is next? According to Isabelle Kocher, now is the time to address growth. In fact, growth has already been showing, since she took office. More importantly, growth can now be addressed exclusively, now that the overall situation is stabilized. However, in the difficult transformation process, she made many enemies with her direct managerial style. In addition, she is the only woman in an all-male word and her fate has darkened since the arrival of new chairman Jean-Pierre Clamadieu, who embodies the all-male cast on the top floor of blue-chip companies. Reuters reported: “Kocher’s job could be up for discussion at a Dec. 17 board meeting, BFM Business reported last week. The company will publish its shareholder meeting resolutions, which would include nomination proposals, early next year. France’s economy and finance ministry and Engie declined to comment. Kocher became the first woman to head up a blue-chip French company when she took on the chief executive role in May 2016 to replace Gerard Mestrallet who became board chairman. She campaigned in 2018 to take on the chairman’s role when Mestrallet retired, but lost out after the government backed Jean-Pierre Clamadieu, then head of Belgian chemical group Solvay, for the job.” Despite universally acclaimed results, and strong support from Engie’s management structure, Isabelle Kocher has been pressured to leave now that her transformation program is complete. In the past months, she has endured destabilization campaigns, slanders, and an increasingly cold management board. President Emmanuel Macron has recently promised shows of good faith to promote women in top management positions, but her future so far remains unclear.
Many formerly state-owned companies, such as the French postal service, have relied on state support and comfortably let themselves drift into irrelevance and a state of disconnection beyond repair. Despite the end of the state-enforced monopoly in 2020, French national railways still rely for one third on taxpayer money to operate, not to mention investment needs. With the success of the transformation program, Engie has proven that managerial resolve and clear leadership could shake up a previously sluggish company and ensure it’s relevant for decades to come.
